Lying on your mortgage application may seem like a good idea at the time. Hiding key pieces of information, embellishing the truth or just straight up lying in order for a mortgage lender to approve your application that they may otherwise have denied can be classed as mortgage fraud.
The penalty for lying on a mortgage application will depend on the nature of the lies that you’ve told. It can range from there being no issue to having your mortgage terminated and having to repay the funds or even being convicted of mortgage fraud and being sent to jail.
In this post, I’ll outline why it’s crucial to provide the correct information on your mortgage application as well as highlight some alternative options so you don’t have to resort to lying but obtain a mortgage on your own merit.
Can You Lie On A Mortgage Application?
No, you should not lie on your mortgage application. Your mortgage lender uses the information you provide them to calculate the level of risk you pose as a borrower. If you lie or embellish the truth, you put the lender at risk of losing money and depending on the extent it can be classed as mortgage fraud.
Also if you hide or change relevant information during the initial phases of your mortgage application, when your mortgage lender performs additional checks before they make the final offer they will most likely uncover these issues.
The underwriting process involves a thorough review of all of the information provided, including additional third-party credit checks and identity checks.
Lying on your application can come in many forms, from telling innocent white lies to telling lies with the intent to deceive or even forging documents. However, remember that every question and requirement is there for a reason and is used as a way for the lender to gauge their level of risk you pose as a borrower and to protect the mortgage lender against fraud.
These lies might include some of the following areas:
- Income (explained further below)
- Marital status
- Spending habits
- Property value
- Source of the deposit money
- Debt & financial obligations
Consequences Of Lying On A Mortgage Application
If you do lie on your mortgage application, there are a number of consequences that you should be aware of, from having your mortgage application denied, negative impacts on your credit score or even being convicted of mortgage fraud and sent to jail.
- Having your mortgage application denied. If your mortgage hasn’t been approved yet, once your mortgage lender discovers that you’ve lied on your application you’ll most likely have your application denied. This can have further consequences, for example, if you’re about to buy a property, a delay in securing the mortgage could result in losing the property you want to buy.
- Difficulty securing a new mortgage. One question that is common in the mortgage application process is whether you’ve had finance refused in the recent past, usually up to 5 years and if you have why did this happen. If you’ve just had a mortgage refused due to lying on your application, that may raise a red flag to the new mortgage lender and they may also refuse to let you borrow money.
- Getting a negative impact on your credit score. If you are refused credit this can cause a negative impact on your credit score as you’ll have to apply to another lender that will have to run another hard credit search during the mortgage application process. It is recommended that you have no more than two hard credit searches per year, so the impact on your credit score could be minimal.
- Have your mortgage cancelled and be required to repay the money. If you’ve already secured a mortgage and your mortgage lender finds out that you lied on your application, they could say you’re in breach of your contract and ask you to repay the money. If you have no other way to secure a new source of funds it can escalate into having your property seized to recover the money.
- Convicted of mortgage fraud and being sent to jail. Depending on the severity of the deception and whether this leads to financial loss for the mortgage lender, you could be convicted of mortgage fraud and sent to jail as well as fines.
Punishment For Mortgage Fraud
Here are the punishments that you could receive for mortgage fraud and as you can see, it can come with quite a long jail sentence. However, this is on the worst case, mainly reserved for those that conduct large scale fraud involving multiple properties such as organised crime gangs.
Punishment for mortgage fraud in the UK. In the UK you can get a prison sentence ranging from 12 months to 10 years, with minor offences resulting in a suspended sentence. You can also get other punishments such as community service, fines and seizure of assets.
Punishment for mortgage fraud in the US. In the US mortgage fraud can come with up to 30 years in federal prison and up to $1 million in fines.
The punishment for opportunistic mortgage fraud, usually conducted by individuals that lie on a mortgage for their main residence such as providing misleading information or embellishing the truth is seen is less serious. However this still can be treated as serious, especially if it has led to financial loss for the lender and if documents were deliberately altered or forged.
Lying About Income On A Mortgage Application
Lying about income on a mortgage application can seem like a good idea as the amount of income you earn can have a direct relationship to how much a mortgage lender will let you borrow, with a lot of lenders offering between 3.5 to 4.5 times your income.
However, remember that during the underwriting process you will be required to submit proof of income in the form of payslips and bank statements showing you receiving the money each month. This is very easy to validate if you’re telling the truth as the numbers won’t align to the details.
For example, if you say you have a permanent job earning a certain amount of money but in reality you have a job with a lower income where the hours can fluctuate quite significantly month on month, the fluctuations in income will raise red flags to the lender. This may make them ask additional questions such as requiring you to provide your employment contract.
Already Lied On Mortgage Application – What To Do?
If you’ve already lied on your mortgage application but haven’t completed the final stages you still have time to withdraw the application. This will avoid the possibility of being convicted for mortgage fraud or for the application to be refused by the underwriter upon further review.
You just need to contact your mortgage advisor or mortgage lender and inform them that some details need to be amended before your application is moved to the next stage.
Depending on your situation, a mortgage advisor may be able to help you get a mortgage on your own merit, even if you think it’s impossible. There are mortgage products and lenders that specialise in all areas, so even if you have problems such as:
- Have bad credit or limited credit history (or getting a joint mortgage with someone that does)
- Have bad spending habits (high outgoing expenses or questionable costs)
- Have a low deposit
- Have a low income or that’s hard to demonstrate (self-employed or zero-hour contracts etc)
If you do fall into any of these categories and is the reason behind you being tempted to lie on your mortgage application, then speaking to a mortgage advisor can definitely help. You may even be recommended a mortgage product you’ve never heard of, which is designed to suit specific circumstances.
If you already have your mortgage in place and are worried about the ramifications of lying on your mortgage application then it may be best to speak to a solicitor. They can review your case and help you understand all of your options.
Overall, the penalty for lying on a mortgage application can be quite server, with maximum pushingments including jail time. Although remember that any negative impacts to your credit can last for over 6 years, which can become quite a significant financial burden.
If you are considering lying on your mortgage application, make sure you think about all of the potential negative consequences that can happen as a result. All of these can be avoided if you just find the right mortgage product for you.
Even if you have a complex situation, such as having bad credit or a low deposit, speaking to a mortgage advisor can help you understand all of your options and get advice specific to your circumstances. You may find that the problem you were worrying about is actually very common and can be easily overcome.
This post I’ve written about what questions to ask a mortgage advisor you may find helpful if you’re wanting to get their help and advice.
Hi, I’m John. I’ve always had a keen interest in Finance, so much so that I’ve made a career out of it! This site is a place where I can share everything I’ve learned as well as give me the excuse to research certain topics.
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